of 81 /81
LEAN SUPPLY CHAIN PRACTICES AND SUPPLY CHAIN RESPONSIVENESS AMONG VEGETABLE OIL PROCESSING FIRMS IN KENYA MBITHUKA, LUCAS MUTHEKE A Research Project Submitted in Partial Fulfillment of the Requirement for the Award of Master Degree of Business Administration (MBA), School of Business, University of Nairobi 2014

Lean supply chain practices and supply chain

  • Upload
    others

  • View
    23

  • Download
    0

Embed Size (px)

Citation preview

Page 1: Lean supply chain practices and supply chain

LEAN SUPPLY CHAIN PRACTICES AND SUPPLY CHAIN

RESPONSIVENESS AMONG VEGETABLE OIL PROCESSING FIRMS

IN KENYA

MBITHUKA, LUCAS MUTHEKE

A Research Project Submitted in Partial Fulfillment of the Requirement for the Award of

Master Degree of Business Administration (MBA), School of Business, University of

Nairobi

2014

Page 2: Lean supply chain practices and supply chain

ii

DECLARATION

I hereby declare that the work contained in this project is my original work and has not been

previously, in it‟s entirely or in part, been presented at any other university for a degree

requisite. All the references cited in the text have been duly acknowledged.

Signed………………………………….. Date……………………….

MBITHUKA, LUCAS MUTHEKE

D61/68050/2011

This management research project has been submitted for examination with my approval as the

University supervisor.

Signed…………………………. Date………………………..

DR. PETERSON MAGUTU

Lecturer, School of Business

University of Nairobi

Signed…………………………. Date………………………..

MR. ERNEST AKELO

Lecturer, School of Business

University of Nairobi

Page 3: Lean supply chain practices and supply chain

iii

ACKNOWLEDGMENTS

It has been an exciting and instructive study period in the University of Nairobi and I feel

privileged to have had the opportunity to carry out this study as demonstration of knowledge

gained during the period studying for my master‟s degree. With these acknowledgments, it

would be impossible to remember those who in one way or another, directly or indirectly, have

played a role in the realization of this research project. Let me, therefore, thank them all

equally. First, I am indebted to the all-powerful God for all the blessings he showered on me

and for being with me throughout the study. I am deeply obliged to my supervisors for their

exemplary guidance and support without whose help; this project would not have been a

success. Finally, yet importantly, I take this opportunity to express my deep gratitude to the

lasting memory of my loving family, and friends who are a constant source of motivation and

for their never ending support and encouragement during this project.

Page 4: Lean supply chain practices and supply chain

iv

DEDICATION

This project is dedicated to my family members.

Page 5: Lean supply chain practices and supply chain

v

ABSTRACT

To make lean process success, level of thinking needs to be changed in order to focus on

management from optimizing separate technologies, assets and vertical department to

optimizing the flow of products and services through entire value streams that flow

horizontally across technologies, assets and departments to customers. Eliminating whole

along entire value steams, instead of at isolated points, creates processes that need less human

effort, less space, less capital and less time to make products and services at far less cost and

with fewer defects, compared with traditional business systems. The research adopted a cross

sectional survey of all vegetable oil processing firm in Kenya, that provided quick,

inexpensive, efficient and accurate means of assessing information about the population. The

target population of the study covered all vegetable oil processing firms in Kenya. There were

about 35 firms that were then dealing in the processing and refining of vegetable oils in Kenya.

In this study, primary data was collected by use of structured and closed ended questionnaire.

The questionnaires was send to supply chain managers or those in equivalent positions in the

vegetable oil processing firms in Kenya by way of email, drop and pick later, by postage or by

way of face to face interview where applicable. The study findings established that the lean

supply chain practices used in vegetable oil processing firms in Kenya were demand

management practices, waste management practices, standardization practices, behavioral

practices, quality inspection activities and quality assurance activities; the firms that have

responsive supply chain experience the advantage of improved lead time for innovative

products life cycle, reduced costs/ increased revenue by optimizing inventory levels under

demand uncertainty , create a win-win situation with suppliers by implementing quantity-

flexible contacts that share risk among supply chain partners, save time and expense by

understanding which supply chain strategies do not need expensive software for

implementation and reduced costs by learning ways of dealing successfully with supply

uncertainty and lean supply chain practices and supply chain responsiveness requires an

information flow and policies from the market place to supply chain members in order to hedge

inventory and available production capacity against uncertain demand.

Page 6: Lean supply chain practices and supply chain

vi

ACRONYMS

CPFR: Collaborative Planning, Forecasting, and Replenishment

EDI: Electronic Data Interchange

FAO: Food and Agriculture Organization

GT: Group Technology

JIT: Just in time

MRI: Minimum Reasonable Inventory

SCM: Supply Chain Management

SKUs: Stock Keeping Units

TCT: Total Cycle Time

TPS: Toyota Production System

TQM: Total Quality Management

USA: United States of America

Page 7: Lean supply chain practices and supply chain

vii

TABLE OF CONTENTDECLARATION.......................................................................................................................... ii ACKNOWLEDGMENTS .......................................................................................................... iii DEDICATION ............................................................................................................................ iv ABSTRACT ................................................................................................................................. v ACRONYMS .............................................................................................................................. vi

TABLE OF CONTENT ............................................................................................................. vii LIST OF TABLES ...................................................................................................................... ix LIST OF FIGURES ..................................................................................................................... x

CHAPTER ONE: INTRODUCTION .......................................................................................... 1

1.1 Background ............................................................................................................................ 1

1.1.1 Lean Supply Chain Practices ...................................................................................... 2

1.1.2 Supply Chain Responsiveness .................................................................................... 4 1.1.3 Vegetable Oil Processing Firms in Kenya .................................................................. 5

1.2 Statement of Problem ......................................................................................................... 7 1.3 Objective of the Study ....................................................................................................... 9

1.4 Importance of the Study ..................................................................................................... 9

CHAPTER TWO: LITERATURE REVIEW .............................................................................11

2.1 Introduction .......................................................................................................................11 2.2 Supply Chain Management ...............................................................................................11

2.3 Lean Supply Chain Practices ........................................................................................... 12

2.3.1 Demand Management Practices ................................................................................ 14

2.3.2 Waste Management Practices .................................................................................... 15 2.3.3 Standardization Practices .......................................................................................... 16

2.3.4 Behavioral practices .................................................................................................. 17 2.4 Supply Chain Responsiveness ......................................................................................... 18

2.4.1 Demand Uncertainty and Variability ........................................................................ 19

2.4.2 Product Variety .......................................................................................................... 20 2.4.3 Time Compression .................................................................................................... 21

CHAPTER THREE: RESEARCH METHODOLOGY ............................................................ 22 3.1 Introduction ...................................................................................................................... 22 3.2 Research Design............................................................................................................. 22

3.3 Target Population ............................................................................................................. 22 3.4 Data Collection ................................................................................................................ 23

3.5 Data Analysis ................................................................................................................... 23

CHAPTER FOUR:..................................................................................................................... 25 DATA ANALYSIS, RESULTS AND DISCUSSIONS .............................................................. 25

4.1 Introduction ...................................................................................................................... 25

Page 8: Lean supply chain practices and supply chain

viii

4.2 Descriptive statistics ........................................................................................................ 25 4.2.1: Demographic Information........................................................................................ 26

4.3 Lean supply chain practices ............................................................................................. 28 4.3.1 Quality assurance practices ....................................................................................... 32

4.3.2 Inspection activities .................................................................................................. 34 4.4 Vendor managed inventory .............................................................................................. 37

4.4.1 Stock outs .................................................................................................................. 38 4.5 Challenges facing vegetable oil processing firms ............................................................ 39

4.5.1 Mitigation of the Challenges ..................................................................................... 39

4.6 Lean Supply Chain Practices ........................................................................................... 40 4.7 Effect of Supply Chain Practices on its Responsiveness ................................................. 45

CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND

RECOMMENDATIONS ........................................................................................................... 51 5.1 Introduction ...................................................................................................................... 51 5.2 Summary of Findings ....................................................................................................... 51

5.3 Conclusion ....................................................................................................................... 53 5.4 Recommendations ............................................................................................................ 54

5.5 Recommendation for further studies ................................................................................ 54

APPENDIX I: Reseach Questionaire......................................................................................... 61

APPENDIX II: Correlation Matrix of Major Lean Supply Chain Practices and The Main

Supply Chain Responsiveness ................................................................................................... 68

APPENDIX III: List of Vegetable Oil Processing and Refining Firms in Kenya ..................... 70

Page 9: Lean supply chain practices and supply chain

ix

LIST OF TABLES

Table 1: Demographic Information for respondents ...................................................................20

Table 2: Years of Operation ........................................................................................................21

Table 3: Demand management practices ....................................................................................24

Table 4: Waste management practices ........................................................................................25

Table 5: Behavioral practices ......................................................................................................29

Table 6: Correlation Matrix of major lean supply chain practices and the main supply chain

responsiveness ............................................................................................................................33

Table 7: KMO and Bartlett‟s Test ...............................................................................................35

Table 8: Factor extraction ..........................................................................................................36

Table 9: Varimax Factor Rotation ...............................................................................................41

Table 10: Correlation ..................................................................................................................42

Table 11: Model's Goodness of Fit Statistics ..............................................................................43

Table 12: Analysis of Variance (ANOVA) ..................................................................................43

Table 13: Regression Coefficients ..............................................................................................45

Page 10: Lean supply chain practices and supply chain

x

LIST OF FIGURES

Figure 1: Quality assurance practices .........................................................................................27

Figure 2: Inspection activities .....................................................................................................28

Figure 3: Vendor managed inventory ..........................................................................................30

Figure 4: Stock outs ....................................................................................................................32

Figure 5: Scree plot ...................................................................................................................37

Page 11: Lean supply chain practices and supply chain

1

CHAPTER ONE: INTRODUCTION

1.1 Background

Supply chain has received much attention from researchers and practitioners. Gunasekaran et

al. (2001) discussed that the role of supply chain metrics and measures in the success of an

organization cannot be overstated because they affect strategic, tactical and operational

planning and control. Moreover, the revolution of supply chain management (SCM) in the last

decade has testified that an increasing number of companies seek to enhance performance

beyond their own boundaries (Boyson et al., 1999; Poirier, 1999).

In the competitive environment, most leading edge companies realized that by

transferring costs either upstream or downstream they are actually not increasing their

competitiveness, since all cost ultimately make up their way to consumers. Supply chain

management guides firms to co-operate with a common goal to increase the overall channel

sales and profitability, rather than completing for a bigger share of a fixed profit. One

strategy for coordinating within and between firms with focus on achieving efficiency,

eliminating waste or overburden and creating value in products is the concept of lean

management (Womack and Jones, 1996; Cigolini at al., 2004)

Companies searching for a way to sustain competitive advantage invest heavily in efficient

business approaches like Just- In-Time, Total Quality Management and Re engineering

designed to optimize the performance of certain firm‟s processes. The realization that

optimization of single firm's operation does not result in appreciable system improvement leads

many firms to seek closer coordination and integration with suppliers. Multiple firms working

together through shared goals and integrated processes may improve the performance of each

Page 12: Lean supply chain practices and supply chain

2

1.1.1 Lean Supply Chain Practices

Harland (1996) stated that supply chain often refers to either a process oriented management

approach to sourcing, producing and delivering goods and services to end customers or, in a

broader meaning to the co-ordination of the various actors belonging to the same supply chain.

Intense competition compels companies to create close relationships with their upstream and

downstream partners (Togar and Romaswami 2004).

Mentzer et al (2001) defines a supply chain as a set of three or more entities (organizations or

individuals) directly involved in the upstream and downstream flow of products, services,

finances and/or information from source to customer. The National Institute of Science and

Technology defines Lean as “A systematic approach to identifying and eliminating waste (non-

value adding activities) through continuous improvement by following the product at the pull

of the customer in pursuit of perfection”. Simply lean means to create more value for

customers with fewer resources. Thus, the fundamental ideas are to maximize customer value

while minimizing waste (MacDuffie and Helper, 1997).

Lee et al (1997) and Lummus et al (2003) explained that the information transferred from one

stage to another in supply chain tends to be distorted and can misguide upstream members in

the production decision resulting in waste and as such points out four lean supply chain

Practices- How organization keep goods and services flowing in a smooth, uninterrupted and

cost effective fashion from suppliers to customer firms end to end, inventory management -

keeping minimal but sufficient inventory in the supply chain pipeline in order to provide good

service level without interruption, lean procurement – how can procurement scale and improve

Page 13: Lean supply chain practices and supply chain

3

its processes to minimize transactions, reduce total cost and work with the best possible

suppliers who meet its requirements and adopting lean within customer and supplier firms; and

how can business work to eliminate waste while adding value to its customers.

Norek (2002) reveals that there are four main significant practices of lean supply chain:

Demand management practices, standardization practices, waste management practices and

behavioral practices that will make the basis of this study. According to Lysons and Farrington

(2006) lean supply chain practices can be developed into three phases. In the first phase which

encompasses leanness as a transition is concerned with efforts made by the organization to

become lean and the practices include delayering (flattening the organization), downsizing (a

reduction in the workforce) and outsourcing (focusing on core activities and subcontracting

non-core to outside providers. In the second phase which is leanness as an outcome focuses on

the structural flexibility following a period of delaying, downsizing and outsourcing and the

practices is Business process re-engineering, which refers to the fundamental rethinking and

radical redesign of business processes to achieve dramatic improvements in critical

contemporary measures of performance such as cost, quality, services and speed.

Here, lean is characterized by elimination of waste in terms of both material and human

resource, low inventories, zero defects (prevention rather than rectification of faults),

integrated production chains, team-working and involvement of all employees and suppliers in

a continuous process to improve products and job design. And lastly leanness as a process that

focuses attention on the attribute of those organizations that can respond to environmentally

produced change where the practice is total quality management (TQM)- A management

Page 14: Lean supply chain practices and supply chain

4

philosophy and company practices that aim to harness the human and material resource of the

organization in the most effective way to achieve the objectives of the organization Just in time

(JIT) – An inventory control philosophy whose goal is to maintain just enough materials in just

the right place and just the right time to make just the right amount of product.

1.1.2 Supply Chain Responsiveness

Supply chain responsiveness is defined as the capacity of promptness and the degree to which

the supply chain can address changes in customer demand (Holweng, 2005; Prater et al., 2001;

Lummus et. al, 2003; Duclos et al., 2003). In a rapidly changing competitive world, there is a

need to develop organizations and supply chains that are significantly more flexible and

responsive than the existing ones (Gould, 1997) Firms need to aptly respond to changing

customer needs so as to succeed in today‟s uncertain environment as well as any disruptions in

supply (Lee, 2004; Christopher, 2004).

Supply chain responsiveness is a key differentiator of the modern approach from traditional

approach of managing supply chains where in modern approach firms have worked hard to

become responsive. In contrast to traditional practices where majority of inventory was held as

finished goods awaiting to be sold, customer sensitive supply chains try to hold majority of

stock as work in progress waiting configuration information coming from the final customer

(Shafer and Meredith, 2009). This is because the insight and information gained from

customers would help to resolve problems regarding market uncertainty and assist supply chain

to respond better to the final customer requirements. Variables that impact customer sensitivity

Page 15: Lean supply chain practices and supply chain

5

in a supply chain include: responding to real time demand, fast introduction of new products,

retain and grow customer relationships and customer based measures (Lin et al., 2006).

1.1.3 Vegetable Oil Processing Firms in Kenya

Kenya's domestic production of vegetable oils is estimated at 35,000 metric tonnes which is

about 15% of its annual demand. An estimated 559,000 mts is imported making vegetable oils

the second most important item after petroleum and about 83,000 mts is exported to foreign

markets. The domestic utilization level is estimated at 232,000 mts (Kenya National Bureau of

Statistics, 2011).

The key player in the industry comprise of processors who extract the oil from the seeds and

oil cake used in the manufacture of animal feeds and refiners who convert crude oil into a

form suitable for human consumption. Increased domestic production of oil seeds by local

manufacturers in Kenya has been constrained by inadequate supply of raw materials, leading to

efforts by Food and Agriculture Organization (FAO) to initiate development of raw material

centers in the country, especially in key growing areas of western Kenya and Lake Victoria

basin. Processing firm like Bidco Oil has been actively supporting and encouraging local

farming of vegetable oil crops especially palm oil. The processing and refining represents the

private sector and related development partners including large scale growers and small scale

farmers (Export Processing Zones Authority, 2005).

According to Kenya National Bureau Statistics (2011), there are about 35 vegetable oil

processors and refiners in Kenya. The largest companies include Bidco Oil Refinaries, Kapa

Oil Refinaries, Palmac Oil Refiners, Diamond Industries, Pwani Oil Refiners and Uniliver

Page 16: Lean supply chain practices and supply chain

6

Kenta Limited. These companies engage in production of cooking oil, fats, edible oils, copra

oil and corn oil among oil products. Some of the large vegetable oil refiners are also involved

in growing of vegetable oil crops and supporting small scale farmers in better farming methods

to increase vegetable oil production in Kenya. According to Export Processing Zones Authority

(2005), these companies are also involved in the marketing of finished vegetable oil products

both locally and internationally. This move has been necessitated by the government of Kenya

trade policy objective of pursuing an outward-oriented industrial policy in order to redirect

industrial production in favour of export.

Kenya exports oil and fats products to mainly East and Horn of Africa countries as well as

Europe and the United States of America (USA) and is ranked 15 Worldwide in export of

vegetable fats and oils (Ministry of trade and industry). The COMESA region is the principal

market of Kenya's vegetable oil products; including Uganda, Tanzania, Zimbabwe, Zambia,

Democratic Republic of Congo, Rwanda and Burundi. Bidco oil refineries opened a plant in

Uganda in order to further increase and develop their market in the region. The export

destination includes Netherlands, the UK and Germany. The country also imports vegetable

oils and fats in order to complement its local production, which is presently inadequate to meet

local demand. Competition in the industry has been so intense such that promotion has led to a

lot of information being available to the customers. Vegetable oil products have witnessed

product changes shifting from traditional and animal oils to solid cooking oils, thereafter the

liquid form and the expected herbal cooking oil in the industry.

Page 17: Lean supply chain practices and supply chain

7

1.2 Statement of Problem

There has been a drastic increase in the pressure on organizations to find new ways to create

and deliver value to customers with fewer resources or to maximize customer value while

minimizing waste for improvements in profitability and reduced costs in the supply chain.

Manufacturing firms face an increasing pressure of customer requirements while at the same

time need to reduce production cost, shorten lead times and lower inventory levels to ensure

profitability (Holweng, 2005). The need for lean suply chains to become responsive arises from

internal factors such as target costing, use of value engineering, use of cross functional teams,

just in time and zero defective products (Lysons and Farrington, 2006) as well as external

factors such as customer lead times, demand specification, product variety, product life cycle,

order to delivery time and distribution lead time (Reichhart and Holweng, 2007).Supply chain

responsiveness relates directly with business performance, increases revenues, lower costs,

leads to customer satisfaction and loyalty hence increased profits in the long-run and thus

motivates both researchers and practitioners to explore the area (Mageto, 2009).

Considering this the relationship between lean supply chain and supply chain responsiveness

has not been addressed. Therefore the unanswered question is how lean supply chain practices

relate to supply chain responsiveness. Vegetable oil processing in Kenya has evolved overtime

and local firms have joined the industry creating stiff competition among the firms processing

vegetable oils. Moreover, various value adding processes from raw material purchase,

production and assembly, to distribution and customer order delivering has been integrated and

Page 18: Lean supply chain practices and supply chain

8

synchronized to achieve the common goal of enhancing customer satisfaction. In this

connection, modern business management has witnessed a significant change from competing

as solely autonomous entities to competing as integrated supply chains in the vegetable

processing industry in Kenya (Omondi, 2012). LaSalle (2005) carried out a study on the

implementation of lean practices in the United States of America and found out that more than

50% of the adopters of lean practices reported improvement and non-adopters were moving

into the mid-tier and started to adopt some, less mature, lean practices but did not address the

issue of responsiveness.

Daud and Zailani (2011) did a research on lean supply chain practices and performance in the

context of Malaysia and found out that lean supply chain practices are directly related to the

performance of the electrical, electronics and electronics manufacturing service companies in

Malaysia. The study did not address responsiveness in the supply chain. Mageto (2009) studied

on the relationship between supply chain performance and supply chain responsiveness in

supermarkets in Nairobi and found out that supply chain performance and supply

responsiveness, reliability, flexibility and timeliness indicate very strong relationship with

supply chain performance. This research did not tackle lean practices in the supply chain.

Omondi (2008) did the application of lean thinking to business process management and found

out that lean management and application of related tools, equipment and techniques is a

continuous process at Kenya Revenue Authority highly driven by the need to improve service

delivery and tax collection while netting those evading taxes.

Page 19: Lean supply chain practices and supply chain

9

The study did not address the issue of responsiveness of the supply chain.Considering these

studies critically, none of them has tried to address the relationship between lean supply chain

practices and supply chain responsiveness. Therefore, this project sought to bridge this gap by

creating a reasonable model of the relationship between the two. This study sought to answer

the question “What is the relationship between lean supply chain practices and supply chain

responsiveness among vegetable oil processing firms in Kenya by investigating some of the

lean supply chain practices used in the vegetable oil processing firms and how responsive the

vegetable oil processing firms are to their supply chain?''

1.3 Objective of the Study

The following were the objectives of this study

(i) To determine the lean supply chain practices used in the vegetable oil processing firms in

Kenya.

(ii) To establish how responsive the vegetable oil processing firms are to their supply chains in

Kenya, and

(iii) To determine the relationship between lean supply chain practices and supply chain

responsiveness among the vegetable oil processing firms in Kenya.

1.4 Importance of the Study

The findings of this research will enable the academicians/researchers in broadening of

syllabus with respect to the impact of lean supply chain practices in determining supply chain

responsiveness. The results will also assist processing firms and their employees in improving

their lean supply chain practices with regard to demand management practices, standardization

practices, waste management practices and behavioral practices.

Page 20: Lean supply chain practices and supply chain

10

The study was of great value to the field of lean supply chain practices in that it contributes to

the existing body of knowledge by focusing on the vegetable oil processing and refining firms

in their effort to adapt to environmental turbulence using appropriate lean practices. To policy

makers, the research findings was helpful to the government economic advisors, policy

strategists and other institution as it will serve as a future reference material to be used to

develop policies in the same industry, or other similar sub-sector.

Page 21: Lean supply chain practices and supply chain

11

CHAPTER TWO: LITERATURE REVIEW

2.1 Introduction

This chapter covers the discussions on the concepts of supply chain management, lean supply

chain practices and supply chain responsiveness as well as benefits and challenges of being

responsive in an uncertain environment and turbulence market.

2.2 Supply Chain Management

The term supply chain refers to all activities involved in the supplying an end user with a

product or service. The perception of each organization that is involved – the ore refiners,

transporters, component producer, manufacturers, wholesalers, retailers and the customer –

being a link in the process makes the analogy of a chain quite appropriate. Goods flow together

with information, funds, paper, and people in both directions along the chain. In addition, the

green revolution encourages recycling, recovery and reuse of products, so even the used

product may be flowing back up the chain.

The supply chain also involves other functional areas and activities as product/service design,

finance, accounting, marketing, human resource, engineering and so on. Supply chain

management (SCM) is the process of trying to appropriately manage this network of activities

and flow (Power and Sohal, 2001). It coordinates and integrates all the supply chain activities

into a seamless process and links all of the partners in the chain, including departments within

an organization as well as the external suppliers, carriers, third party companies and

Page 22: Lean supply chain practices and supply chain

12

information system providers and enables manufacturers to actively plan and collaborate across

a distributed supply chain, to ensure all parties are aware of commitments, schedules and

expedites (Shafer and Meredith, 2003)

The objective of attempting to manage activities that lie outside a manager‟s normal realm of

responsibility is to reduce costs of delivering a product or service to a user and improve its

value in terms of quality, functionality and timeliness. Other costs in the supply chain can be

eliminated with better information sharing and managerial oversight. SCM has exploded in

interest primarily because of the development of new information technologies such as

intranets, EDI (electronic data interchange) and Internet. These technologies, in conjunction

with global competition, have fostered an interest and the ability in improving processes along

the entire supply chain resulting in better performance at reduced costs (Tan et al., 1998;

Frohlich and Westbrook, 2001; Vickery et al., 2003; Li et al., 2006).

2.3 Lean Supply Chain Practices

Lean is defined as a “Systematic approach to identifying and eliminating waste (non-added

activities) through continuous improvement by following the product at the pull of the

customer in pursuit of perfection” (The National Institute of Science and Technology). Simply

lean means to create more value for customers with fewer resources, thus the fundamental idea

is to maximize customer value while minimizing waste. Wu and Wee (2009) concluded that the

term „lean‟ means a series of activities or solutions to eliminate waste reduce non-value added

operations and improve the value added operation.

Page 23: Lean supply chain practices and supply chain

13

This value added and non-value added concept were derived mainly from Toyota Production

System (TPS) which highlighted eight forms of waste: Overproduction, waiting, conveyance,

over-processing, excess inventory, movement, defects and unused employee creativity

(Monden, 1998; Liker, 2004). A lean organization understands customer value and focuses its

key process to continuously increase it. The ultimate goal is to provide perfect value to the

customer through a perfect value creation process that has zero waste. To make lean process

success, level of thinking needs to be changed in order to focus on management from

optimizing separate technologies, assets and vertical department to optimizing the flow of

products and services through entire value streams that flow horizontally across technologies,

assets and departments to customers (Lean Enterprise Institute, 2006).

Eliminating whole along entire value steams, instead of at isolated points, creates processes

that need less human effort, less space, less capital and less time to make products and services

at far less cost and with fewer defects, compared with traditional business systems. Companies

are able to respond to changing customer desires with high variety, high quality, lows cost and

with very fast throughput times.

Anand and Kodali (2008) emphasized that the theory and principles of lean and its associated

tools, practices and procedures can be extended outside the boundaries of an organization to its

supply chains. However, the concept of lean supply chain was proposed in 1994, when the

proponents of lean manufacturing, Womack and Jones (1994) envisioned the concept of “Lean

enterprise”. Bozdogan (2002) emphasized that the success of lean supply chain management

principles is derived from ten basic lean principles : focus on the supplier network value

Page 24: Lean supply chain practices and supply chain

14

stream, eliminate waste, synchronize flow, minimize both transaction and production costs,

established collaborative relationships while balancing cooperation and competition, ensure

visibility and transparency, develop quick response capability, manage uncertainty and risk,

align core competencies and complementary capabilities and foster innovation and knowledge

sharing; building and maintaining a lean supply revolves around four key practices. Mastering

the four practices leads to a lean and effective supply chain (Norek, 2002). They are demand

management practices, waste management practices, standardization practices and behavioral

practices.

2.3.1 Demand Management Practices

Demand management is concerned with balancing the requirement of internal and external

customers with supply chain capabilities. It includes forecasting demand, synchronizing

supply and demand, increasing flexibility, reducing the variability of demand by means of

standardization and the control of inventory (Lysons and Farrington, 2006). Demand

management practices include: planning demand, communicating demand, influencing demand

and managing and prioritizing demand.

Planning demand involves more than just forecasting. Proposed in 1995, Collaborative

Planning, Forecasting, and Replenishment (CPFR) has evolved into a Web based tool to

coordinate demand forecasting, production and purchase planning, and inventory

replenishment between supply chain partners. CPFR is used as a means of integrating all

members of an n-tier supply chain, including manufacturers, distributors and retailers.

Communicating demand involves communicating demand plan to the supply and finance

Page 25: Lean supply chain practices and supply chain

15

organization and increasingly, to supply chain partners. Influencing demand includes marketing

and selling tactics, product positioning, pricing, promotions and other marketing and sales

efforts, while managing and prioritizing demand includes managing customer orders to match

available supply (Shafer and Meredith, 2003)

2.3.2 Waste Management Practices

Waste, as defined by Toyota's past President, Fujio Cho, is anything other than the minimum

amount of equipment, materials, parts and workers (working time) which are absolutely

essential to production, and the seven types if waste to be eliminated in the supply chain are:

waste from overproduction, waste of waiting time, transportation waste, inventory waste,

processing waste, waste of motion and waste from product defects. Value chain mapping is a

great way to analyze existing processes and the practice to waste management include having

focused factories networks, employing Group Technology (GT), practicing quality at source.

JIT production, uniform plant loading, Kanban production control system and minimizing set-

up times (Aquilano et al., 1995).

Focused factory networks means building small specialized plants rather than vertically

integrated manufacturing facilities because large operations and their bureaucracies are

difficult to manage while plants designed for one purpose can be operated more economically.

Group Technology is the philosophy in which similar parts are grouped into families and the

processes required to make the parts are arranged in a specialized work cell, that eliminates

movement and queue (waiting) time between processes, reduce inventory and reduce the

number of employees, Quality at the source means do it right first time, and when something

Page 26: Lean supply chain practices and supply chain

16

goes wrong, stop the assembly line immediately, implying factory workers become their own

inspectors personally responsible for the quality of their own output. JIT means producing

what is needed and no more, anything over the minimum amount necessary is viewed as waste,

because effort and material expended for something not needed now cannot be utilized now.

The goal is to drive all inventory queues to zero, thus minimizing inventory investment and

shortening lead time.

Uniform plant loading refers to smoothing the production flow to dampen the reaction waves

that normally occur in response to schedule variations, while Kanban production control

system uses a signaling device to regulate JIT flows, where the authority to produce or supply

additional parts comes from downstream operations. Because small lot sizes are the norm,

machine must be quickly set-up to produce the mixed models on the line. Achieving set-up

time‟s reduction, set-up times are divided into internal and external activities. Internal set-up

must be done while a machine is stopped while external set-up can be done while the machine

is running (Aquilano et al., 2005)

2.3.3 Standardization Practices

Standards are documents that stipulate or recommend minimum levels of performance and

quality of goods and services and operational conditions in a given environment. They help

clear specification, achieve reliability and reduce costs, accurate comparison of quotation, less

depended on specialist suppliers, reduce error and conflict and reduce cost of material handling

(Lysons and Farrington, 2006). Practices include variety reduction, quality assurance and

quality control. Variety reduction can make substantial saving in inventory by standardizing

Page 27: Lean supply chain practices and supply chain

17

and rationalizing the range of material, parts and consumables and has the benefits of reducing

of holding costs for stocks, release of money tied up in stock, easier specification when

ordering, narrows range of inventory and reduces supplier base.

Quality assurance refer to those planned and systematic activities implemented within the

quality systems and demonstrated as needed to produce adequate confidence that an entity

will fulfill requirements for quality and is concerned defects prevention involves a number of

approaches: quality systems (ISO 9000), new design control, design for manufacturing

processes, incoming material control and supplier appraisal (BS EN ISO 8402, 1995).

Quality control is the technique and activities that are used to fulfill requirements for quality

and the main concern is defects detection and correction and relates to such activities as

determining where, how and at what intervals inspections should take place, the collection and

analysis of data relating to defects and determining what corrective action should be taken (BS

EN ISO 8402, 1995). Four inspection activities are receiving inspection, classification

inspection, control inspection and audit inspection.

2.3.4 Behavioral practices

Supply chain partners from upstream suppliers to downstream customers must collaborate as a

team to provide value to the end user. Organizational behavior is the study of the structure,

functioning and performance of the organization, and the behavior of groups and individuals

within them. Best in class behavioral practices include job enrichment, multiple carrier ladders,

Page 28: Lean supply chain practices and supply chain

18

high employee participation, many and flexible incentives and quality of work life emphasis

(Huczyski and Buchanan, 2002).

2.4 Supply Chain Responsiveness

The concept of agility and responsiveness is something to be pursued, meaning that firms that

can respond quickly are better placed to balance supply and demand within the supply chain.

Firms that have responsive supply chain will experience the advantage of improved lead time

for innovative products or those in the early stages of the product life cycle, reduced costs/

increased revenue by optimizing inventory levels under demand uncertainty , create a win-win

situation with suppliers by implementing quantity- flexible contacts that share risk among

supply chain partners, save time and expense by understanding which supply chain strategies

do not need expensive software for implementation and reduced costs by learning ways of

dealing successfully with supply uncertainty. It also brings about manufacturing flexibility- the

ability of the manufacturing system of an organization to adapt to change (Stalk and Hout,

1990; McCutcheon et al., 1994; Bower and Hout, 1998). Manufacturing flexibility has been

considered as a major competitive weapon for manufacturing firms due to its ability to help

cope with uncertain environment and turbulence markets and is capable of providing the firms

with the ability to change volume and mix of production, to rapidly and frequently develop

new products, and to better respond to competition (Shingo, 1989).

A responsive supply chain requires an information flow and policies from the market place to

supply chain members in order to hedge inventory and available production capacity against

Page 29: Lean supply chain practices and supply chain

19

uncertain demand (fisher, 1997). Improving responsiveness in a supply chain, however, incurs

costs in two primary reasons: Excess buffer capacity and inventories need to be maintained,

and Investments to reduce lead times need to be made. Providing the right degree of

responsiveness and having an efficient supply chain at the same time is a goal that is hard to

achieve and typically involves trade –off- decision by management , since increased

responsiveness can be perceived to come at the expense of reduced efficiency and vice versa

(Mason-Jones and Towill 2000). Supply chain responses can be discussed under the following

headings

2.4.1 Demand Uncertainty and Variability

Demand uncertainty and demand variability are often used interchangeably. However demand

uncertainty refers to a limited knowledge about what is going to sell or the inability to predict

demand and is measured by forecast error, while demand variability refers to the range of

values for demand, which is variable based on effort in marketing, promotions, holidays,

special events and is measured through variability of the historical demand (Davis, 1993).

Uncertainty is identified as the main reason for being responsive. With reliable information

about demand condition, there would be no need to be responsive.

The need arises from the uncertainty that comes from volume and/or product mix changes in

the customer demand signal (Davis, 1993; Fisher et al, 1994; Towill and Christopher, 2002).

Uncertainty comes from three different sources namely supply chain uncertainty, process

uncertainty and demand uncertainty, with demand uncertainty being the most severe type

(Davis, 1993).

Page 30: Lean supply chain practices and supply chain

20

2.4.2 Product Variety

Literature has suggested several techniques to optimize product variety. A classic analysis of

the impact of product variety is provided in Baumol and Ide (1956) who captured the trade off

by pointing out that greater product variety makes a store more attractive to customers by

increasing the probability of finding items that they want in the store, but also makes it less

attractive by increasing of shopping in the store. The management of product variety is on its

implication on the firms performance and the need arises both from the competitive importance

of the product variety in today‟s market, and its potential financial impact for the product

development activities and manufacturing operations (Fisher et al, 1994).

Demand uncertainty is amplified by product variety, as the same aggregated demand is split

over more Stock Keeping Units (SKUs), leading to an increase in the aggregated errors

associated with each forecast. Product variety increases the need to be responsive as the range

of the external flexibility increases and customers are not willing to accept longer lead times,

implying firms have to rethink the level of product variety that is really demanded (Fisher et al,

1994; MacDuffie et al, 1997).Three dimensions of product variety are internal, external and

dynamic. Internal product variety refers to the complexity within a firms structure and can be

approximated by the number and variety of components required for a given product. External

product variety refers to the SKUs available to a firm‟s customers at any given point. Dynamic

product variety mainly refers to shortened product life cycle (Davis, 1993).

Page 31: Lean supply chain practices and supply chain

21

The demand of a product will always be harder to predict at the beginning of the life cycle, as

no past demand patterns for the product is available, and because customers may react

unexpectedly to the new product. Higher dynamic variety further increases demand

uncertainty. Thus product variety can directly inhibit supply chain from being responsive since

it makes the use of finished goods buffer more costly (Davis, 1993; Fisher et al, 1994)

2.4.3 Time Compression

Modern supply chains are expected to respond rapidly, effectively and efficiently to changes in

the market place. Simultaneously there is the drive to achieve world class customer service

levels coupled with Minimum Reasonable Inventory (MRI). This results in classic conflict of

interest between marketing, production and materials management. Marketing want the

complete product range available off-the shelf; production is looking to manufacture in

economic batch quantities so as to achieve economies of scale and materials management is

trying to minimize storage and distribution costs which in turn, requires that a total system

MRI policy be adopted. Time compression at all stages in the supply chain is seen as the way

to respond to these challenges (Mason-Jones and Towill, 2000).

Unfortunately many firms take a restrictive view of time compression which they link purely

with production cycle time reduction. However Thomas (1990) utilizes the phrase Total Cycle

Time (TCT) stating that the first word of TCT was intended to express how short cycle times

can be applied productively to all segments of a business, not just manufacturing efforts”. This

distinction is important; hence TCT compression programmes

Page 32: Lean supply chain practices and supply chain

22

CHAPTER THREE: RESEARCH METHODOLOGY

3.1 Introduction

The purpose of this chapter is to provide an insight on the research adopted, the target

population studies, data collection methods employed and data analysis methods used when

organizing and analyzing the data for chapter four.

3.2 Research Design

The research adopted a cross sectional survey of all vegetable oil processing firm in Kenya,

that provided quick, inexpensive, efficient and accurate means of assessing information about

the population (Zikmud, 2003). Further, this type of design offers an accurate profile of

persons, events, or situation (Robinson, 2002). It allowed one to collect quantitative data which

can aid in the analysis using descriptive and inferential statistics (Saunders et al., 2007).

3.3 Target Population

The target population of the study covered all vegetable oil processing firms in Kenya.

According to Kenya Association of Manufacturers (KAM) (2011) directory Kenya National

Bureau of Statistics (KNBS) (2011) economic survey, there were about 35 firms that were then

dealing in the processing and refining of vegetable oils in Kenya. The composition of the firms

included processors, refiners and millers as classified by Export Processing Zones Authority

(2005). Since the population was considered small (35), this study adopted census survey.

Page 33: Lean supply chain practices and supply chain

23

3.4 Data Collection

In this study, primary data was collected by use of structured and closed ended questionnaire.

The questionnaire was considered most appropriate because it allowed for collection of data

from the responds within a short time and provides a high degree of data standardization and

adoption of generalized information amongst the population. The questionnaires was send to

supply chain managers or those in equivalent positions in the vegetable processing firms in

Kenya by way of email, drop and pick later, by postage or by way of face to face interview

where applicable. The structure of the questionnaire is in three parts. The first section covers

the general information of the firm under study. The second part has questions concerning the

lean supply chain practices and the extent to which the practices have been implemented. The

last part focuses on supply chain responsiveness where the responsiveness indicators and there

unit of measure is obtained and data for the last five years captured.

3.5 Data Analysis

Completed questionnaire were edited for uniformity, completeness and consistency. The

questionnaire was coded to allow for statistical analysis. Analysis was done by way of

descriptive statistics. Data was presented by use of tables, graphs, proportions, means and

percentages. To assist in analyzing data, factor analysis was used as it enabled to sort out and

analyze the major lean supply chain practices as well as the main supply chain responsiveness

indicator in the study. A multiple regression analysis was used to establish the relationship

Page 34: Lean supply chain practices and supply chain

24

between supply chain responsiveness and lean supply chain practices i.e. Supply chain

responsiveness= ƒx (Lean supply chain practices)

Page 35: Lean supply chain practices and supply chain

25

CHAPTER FOUR:

DATA ANALYSIS, RESULTS AND DISCUSSIONS

4.1 Introduction

This chapter covers data presentation and analysis. The main objective of the study was to

analyze the effects of lean supply chain practices and supply chain responsiveness among

vegetable oil processing firms in Kenya. Specific objectives were to determine the lean supply

chain practices used in the vegetable oil processing firms in Kenya; establish how responsive

the vegetable oil processing firms are to their supply chains in Kenya and to determine the

relationship between lean supply chain practices and supply chain responsiveness among the

vegetable oil processing firms in Kenya.

4.2 Descriptive statistics

In order to simplify the discussions, the researcher provided tables and figures that summarize

the collective reactions and views of the respondents. The sample population for the study

comprised of all vegetable oil processing firms in Kenya. They comprised of 35 vegetable oil

processing firms in Kenya and the study targeted 35 supply chain managers of the firms. The

questionnaires distributed to the supply chain managers were 35 while those returned were 31

bringing the response rate at 88%. This response rate was adequate according to Mugenda and

Mugenda (1999) who argued that a response rate of 50% is adequate for analysis and reporting;

a rate of 60% is good and a response rate of 70% and over is excellent.

Page 36: Lean supply chain practices and supply chain

26

4.2.1: Demographic Information

The ownership of the firms is as below analyzed. The study found out that the ownership

structure of the vegetable oil processing firms is as varied as illustrated and it shows local

domination by 29% with foreign coming second at 23%.

Table 4.1: Ownership structure

Frequency Percentage

Foreign 7 23%

Private 5 16%

Local and Foreign 4 13%

Government owned 2 6%

Private and government owned 4 13%

Local 9 29%

Total 31 100%

Source: research data

According to the study findings, the majority of the vegetable oil processing firms were local

accounting for 29%, the ownership structure of foreign vegetable oil processing firms

accounted for 23%, the ownership structure of private vegetable oil processing firms accounted

for 16%, the ownership structure of both local and foreign and both private and government

owned vegetable oil processing firms accounted for 13% respectively while the ownership

structure of government owned vegetable oil processing firms accounted for 6%. The study

deduced that the majority of the vegetable oil processing firms in Kenya were local firms.

Table 4.2: Computers Networked

Frequency Percentage

Departmentally 7 23%

Interdepartmentally 15 48%

Externally 9 29%

Total 31 100%

Source: research data

Page 37: Lean supply chain practices and supply chain

27

The study sought to find out how the firms‟ computers were networked in their organization.

The study found out that the majority of the firms had their computers networked

interdepartmentally accounting for 48%, the firm that had their computers networked

externally accounted for 29% while those firms that indicated that their computer were

networked departmentally accounted for 23%.

The number of years in operation can influence supply chain responsiveness and the practice of

lean principles. The respondents were required to indicate the number of years their firm has

been in operation and the results were as shown in the table 3 below.

Table 4.3: Years of Operation

Measurement Category Absolute score Percentage Mean Score

Years of operation < 5 years 5 16%

5-10 years 9 29%

11-15 years 8 26%

16-20 years 5 16%

Above 20 years 4 13%

total 31 100%

Source: research data

From the findings in table 3 above, the majority of the firms have been in operation for more

between 16-20 years with a 16% score and above 20 years with 13% and then lowest. As

presented by the respective means the (5-10) years bracket had the highest number of

respondents at a mean score of 29% followed by (11-15) years. This is an indication that the

firms that participated in the study have been in operation for a long while and they use lean

supply chain practices in their processing firms. The respondents were required to indicate the

size of the company by indicating the number of employees in their company. The respondents

Page 38: Lean supply chain practices and supply chain

28

indicated the number of employees ranged from 1000 to 2000 employees in their company.

The respondents were required to indicate the factory size i.e. land occupied in Acres. The

respondents indicated that the companies owned land that ranged from 7 acres to 15 acres was

land for the company.

The respondents were asked to indicate the annual production of the companies and the results

indicated that the annual production ranged from 500 tons to 65,000 tons per year. The

respondents were asked to indicate the annual production of the companies and the results

indicated that the annual production ranged from 500 tons to 65,000 tons per year.

4.3 Lean supply chain practices

The study sought to determine the lean supply chain practices used in the vegetable oil

processing firms in Kenya. Lean supply chain practices used in these processing firms include

demand management practices, waste management practices and standardization practices.

The respondents were asked the extent to which their firm implements demand management

practices in a five point Likert scale. The range was „to a very great extent (5)‟ to „very small

extent (1). The scores of „Very small extent and small extent‟ have been taken to present a

variable which had an impact to a small extent (S.E) (equivalent to mean score of 0 to 2.0 on

the continuous Likert scale; The scores of „Moderately‟ have been taken to represent a variable

that had an impact to a moderate extent (M.E.) (equivalent to a mean score of 3.0 that is 75%

on the continuous Likert scale. The score of „Very great extent and Great extent‟ have been

taken to represent a variable which had an impact to a great extent (G.E.) (equivalent to a mean

score of 4.1 to 5.0 on a continuous Likert scale.

Page 39: Lean supply chain practices and supply chain

29

A standard deviation of >1.5 implies a significant difference on the impact of the variable

among respondents.

Table 4.4: Demand management practices

Demand management practices Mean Std.

Dev

The firm has invested time and money in collaborative demand planning 4.4 1.29

The firms always conducts annual demand forecasting 4.2 1.23

The firm always conducts annual production and purchasing planning 4.1 1.22

The firm always communicates its demand forecasts to its supply chain

partners.

4.2 1.12

The firm always does product positioning, pricing and promotion of its

products.

3.6 1.11

The firm manages its customer orders to match available supply. 4.3 1.16

Source: research data

According to the study findings, it was established that the firm has invested time and money

in collaborative demand planning was to a great extent (mean of 4.4), the firms always

conducts annual demand forecasting was to a great extent (mean of 4.2), the firm always

conducts annual production and purchasing planning was to a great extent (mean of 4.1), the

firm always communicates its demand forecasts to its supply chain partners was to a great

extent (mean of 4.2), the firm always does product positioning, pricing and promotion of its

products was to a moderate extent (mean of 3.6) while the firm manages its customer orders to

match available supply was to a very great extent (mean of 4.3). The study deduced that

Page 40: Lean supply chain practices and supply chain

30

demand management is concerned with balancing the requirement of internal and external

customers with supply chain capabilities according to Lysons and Farrington (2006).

Table 4.5: Waste management practices

Waste management practices Mean Std.

Dev

The firm has small specialized plants rather than vertically

integrated manufacturing facilities.

4.6 1.19

The firm practices the philosophy of grouping similar parts in families

to eliminate movement and queue

3.8 1.03

The firm encourages doing the right thing the first time 4.3 1.12

The firm produces what is needed and no more (JIT) 4.2 1.24

The firms production flow is smooth to dampen reaction waves that

occur in response to schedule variations

3.6 1.17

The authority to produce or supply additional parts always comes from

the downstream

4.3 1.14

Source: research data

The study sought to find out the extent to which firms have implemented waste management

practices. According to the study findings, it was established that the firm has small specialized

plants rather than vertically integrated manufacturing facilities was to a very great extent (mean

of 4.6), that the firm practices the philosophy of grouping similar parts in families to eliminate

movement and queue was to a moderate extent (mean of 3.8), that the firm encourages doing

the right thing the first time was to a very great extent (mean of 4.3), that the firm produces

what is needed and no more (JIT) was to a great extent (mean of 4.2), that the firms production

flow is smooth to dampen reaction waves that occur in response to schedule variations was to a

Page 41: Lean supply chain practices and supply chain

31

moderate extent (mean of 3.6) while that the authority to produce or supply additional parts

always comes from the downstream operations was to a very great extent (mean of 4.3).

The study deduced that waste management practices is anything other than the minimum

amount of equipment, materials, parts and workers (working time) which are absolutely

essential to production, and the seven types if waste to be eliminated in the supply chain are:

waste from overproduction, waste of waiting time, transportation waste, inventory waste,

processing waste, waste of motion and waste from product defects according to Aquilano et al.,

(1995).

Table 4.6: Standardization practices

Standardization practices Mean Std. Dev

The firm has standardized and rationalized the range of

materials, parts and consumables

3.7 1.21

The firm always employs quality assurance at all times 4.6 1.1

The firm encourages quality control activities in all its

production stages

3.9 1.14

Source: research data

The study sought to find out the extent to which the vegetable oil processing firm implemented

standardization practices.

The study sought to find out the extent to which firms have implemented Standardization

practices. According to the study findings, it was established that the firm has standardized and

rationalized the range of materials, parts and consumables was rated to a moderate extent

Page 42: Lean supply chain practices and supply chain

32

(mean of 3.7), that the firms always employs quality assurance at all times was to a very great

extent (mean of 4.6) while that the firm encourages quality control activities in all its

production stages was to a moderate extent (mean of 3.9). The study deduced that

standardization practices help clear specification, achieve reliability and reduce costs, accurate

comparison of quotation, less depended on specialist suppliers, reduce error and conflict and

reduce cost of material handling (Lysons and Farrington, 2006). These practices include variety

reduction, quality assurance and quality control.

4.3.1 Quality assurance practices

The respondents were required to identify the quality assurance activities that the firm practices

as an approach to defect prevention. According to the study findings, it established that the

majority indicated that Quality system (ISO 9000) was the quality assurance practice identified

as an approach to defect prevention accounting for 26%, incoming material control was the

quality assurance practice identified as an approach to defect prevention accounting for 19%,

Page 43: Lean supply chain practices and supply chain

33

Figure 4.1: Quality assurance practices

0 5 10 15 20 25 30

Quality system (ISO 9000)

New design control

Design for manufacturing processes

Incoming material control

Supplier appraisal

All of the above

None of the above

8

3

5

6

4

5

0

26%

10%

16%

19%

13%

16%

0

Quality assurance practices

Percentage Frequency

Source: research data

design for manufacturing processes and all of the above quality assurance practice identified as

an approach to defect prevention accounted for 16% respectively, supplier appraisal was the

quality assurance practice identified as an approach to defect prevention accounted for 13%

while new design control was the quality assurance practice identified as an approach to defect

prevention accounted for 10%. The study deduced that the quality assurance practice used by

the vegetable oil processing firms in Kenya was Quality system (ISO 9000).

Page 44: Lean supply chain practices and supply chain

34

4.3.2 Inspection activities

The respondents were requested to identify the inspection activities that are undertaken in their

firms to detect defects. According to the study findings, it established that the majority firms

identified the inspection activities that are undertaken in their firms to detect defects as audit

inspection accounting for 32%, control inspection was identified an inspection activity

undertaken to detect defects accounting for 26%, all of the above inspection activities was

identified an inspection activity undertaken to detect defects accounting for 16% while

receiving inspection and classification inspection were identified an inspection activity

undertaken to detect defects accounting for 13% respectively.

The study deduced that the inspection activity that was undertaken by vegetable oil processing

firms in Kenya was the audit inspection.

Page 45: Lean supply chain practices and supply chain

35

Figure 4.2: Inspection activities

Source: research data

Page 46: Lean supply chain practices and supply chain

36

4.3.3 Behavioral practices

The respondents were requested to rate the extent to which the firm implements behavioral

practices.

Table 4.7: Behavioral practices

Behavioral practices Mean Std. Dev

The firm has always broadened the experience of work to

enhance employee needs satisfaction

4.6 1.08

The firm has multiple carrier ladders for its staff 4.1 1.23

The firm always encourages high employee participation 4.6 1.21

The firm has many and flexible employee incentives 3.4 1.03

The firm always encourages quality of working life emphasis 4.3 1.18

Source: research data

According to the study findings, it established that the respondents rated the behavioral

practices on the firm has always broadened the experience of work to enhance employee needs

satisfaction to a very great extent (mean of 4.6). The behavioral practice on the firm has

multiple carrier ladders for its staff was rated to a great extent (mean of 4.1). The behavioral

practice on the firm has always encouraged high employee participation was rated to a very

great extent (mean of 4.6).

The behavioral practice on the firm has many and flexible employee incentives was rated to a

moderate extent (mean of 3.4) while the behavioral practice on the firm has always encourages

Page 47: Lean supply chain practices and supply chain

37

quality of working life emphasis was rated to a great extent (mean of 4.3). The study deduced

that the supply chain partners from upstream suppliers to downstream customers collaborate as

a team to provide value to the end user. According to Huczyski and Buchanan, 2002 best in

class behavioral practices include job enrichment, multiple carrier ladders, high employee

participation, many and flexible incentives and quality of work life emphasis.

4.4 Vendor managed inventory

Figure 4.3: Vendor managed inventory

0

50

100

Frequency Percentage

23

Yes, 75%

8

No, 25%

Vendor managed inventory

Yes No

Source: research data

The respondents were requested to indicate yes or no on whether their firm practice “Vendor

managed inventory” management technique for the customers. According to the study findings,

the majority of respondents indicated yes accounted for 75% while those who indicated no

accounted for 25%. The study deduced that the vegetable oil processing firms in Kenya

practice vendor managed inventory management techniques for customers.

Page 48: Lean supply chain practices and supply chain

38

According to Reichhart and Holweng (2007) Vendor Managed Inventory is a process where the

vendor creates orders for their customers based on demand information that they receive from

the customer. The vendor and customer are bound by an agreement which determines inventory

levels, fill rates and costs. This arrangement can improve supply chain performance but

reducing inventories and eliminating stock-out situations.

4.4.1 Stock outs

The study sought to find out how often firms face stock outs in their firms. According to the

study findings, it was established that the majority of the respondents indicated that their firm

faces stocks outs semiannually accounting for 61%, the firms that indicated that they run out of

stocks monthly and others specified to be annually accounted for 16% respectively while the

firms that indicated that they run out of stock weekly accounted for 7%. The study deduced

that the vegetable oil processing firms in Kenya run out of stocks semiannually.

Figure 4.4: Stock outs

Source: research data

Page 49: Lean supply chain practices and supply chain

39

4.5 Challenges facing vegetable oil processing firms

The study sought to find out the challenges that are facing vegetables oil processing firms in

Kenya. According to the study findings, the study deduced the challenges facing vegetable oil

processing firms were: ability to develop and maintain the cost leadership process to reduced

cost without sacrificing quality; price competitiveness; accessibility of financial resources to

high efficient production equipment; designing creative intensive strategies; government

imposing external costs; technological innovation; human resource policies; organizations

adopt technological innovation and intensive strategies to keep pace with the changing

environment.

4.5.1 Mitigation of the Challenges

The study sought to find out how the vegetable oil processing firms mitigation the challenges

they face. According to the study findings, it established that in the ability to develop and

maintain cost leadership processes they face challenges such as stiff competitive prices hence

they produce more stocks that do not run out; accessibility of financial resources to invest in

high efficient production equipment in an effort to adapt to the strategic responses while

responding to environmental changes; creating intensive strategies to keep pace with changing

environment; developing policies that protect the firms from government interference

especially on the pricing of their products; through training and seminars the adoption of

technological innovation and intensive strategies to improve value for the customers.

Page 50: Lean supply chain practices and supply chain

40

4.6 Lean Supply Chain Practices

The respondents were given 19 indicators of lean supply chain and asked to rank the extent to

which each factor was significant to their firms using a scale ranging from 1 = very small

extent to 5 = very great extent. Dimension reduction technique was then applied on the 19

factors as they were too many. In order to reduce and classify the above factors into

meaningfully categories, factor analysis was conducted on the lean supply chain practices.

Kaiser-Meyer-Olkin Measure of Sampling Adequacy and Bartlett‟s Test of Sphericity was

conducted as preliminary test to establish the appropriateness of Principal Component

Analysis. From Table 4.9, KMO statistic had a value of 0.930, indicating that the sum of the

partial correlations is small relative to the sum of the correlations, an indicator of non-diffusion

in the pattern of the correlations. In other words, the pattern of the correlations is relatively

compact and so factor analysis should yield distinct and reliable factors. Bartlett‟s Test of

Sphericity had a significance value of p < .001. We are therefore confident that factor analysis

is appropriate for this data

Table 4.9: KMO and Bartlett’s Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy .930

Bartlett‟s Test of Sphericity Approx Chi-Square 19334.492

Df 71

Sig .000

Source: research data

Table 8 lists the eigenvalues associated with the linear component (factor) before extraction,

after extraction and after rotation. As shown, before extraction, SPSS identified 19 linear

Page 51: Lean supply chain practices and supply chain

41

components. The eigenvalue associated with each factor represents the variance explained by

the particular linear component. Factor 1 explains 23.01% of total variance. It is clear that the

first few explain relatively large amounts of variance as opposed to subsequent once. Factors

with eigenvalues greater than one were then extracted, leaving us with only 5 factors. The

eigenvalues and the percentage of variance explained associated with the extracted and rotated

factors are displayed.

Table 4.10: Factor extraction

initial eigenvalue extractions sums of squares loadings rotations sum of squares loadings

component total

% of

variance cumulative % Total

% of

variance

cumulative

% total

% of

variance cumulative %

1 7.29 23.01% 23.01% 7.29 23.01% 23.01% 7.11 22.44% 22.44%

2 5.739 18.11% 41.12% 5.739 18.11% 41.12% 5.70 17.99% 40.43%

3 4.317 13.63% 54.75% 4.317 13.63% 54.75% 4.11 12.97% 53.40%

4 3.227 10.19% 64.93% 3.227 10.19% 64.93% 3.36 10.61% 64.01%

5 2.145 6.77% 71.70% 2.145 6.77% 71.70% 2.44 7.69% 71.70%

6 0.895 2.82% 74.53%

7 0.806 2.54% 77.07%

8 0.783 2.47% 79.54%

9 0.751 2.37% 81.91%

10 0.717 2.26% 84.18%

11 0.684 2.16% 86.34%

12 0.67 2.11% 88.45%

13 0.612 1.93% 90.38%

14 0.587 1.85% 92.24%

15 0.549 1.73% 93.97%

16 0.523 1.65% 95.62%

17 0.508 1.60% 97.22%

18 0.456 1.44% 98.66%

19 0.424 1.34% 100.00%

Source: research data

Figure 5 presents the scree plot with a pointer to the point of inflexion on the curve. This

confirms our choice of five factors as extracted by the PCA. The Varimax rotated factor matrix.

Page 52: Lean supply chain practices and supply chain

42

As shown there are five factors and the variables uniquely load very highly onto only one

factor. The indicators/variables that loaded very highly on factor one appears to all relate to

major lean supply chain practices and the main supply chain responsiveness. Factor analysis

has thus found that cross-functionality of the demand management, waste management,

standardization practices, inspection activities, assurance activities and behavioral practices are

the success factors for these factors being critical to the success of the major lean supply chain

practices and the main supply chain responsiveness. The following brief discussion presents

the rationale for these five factors being critical to the success of the lean supply chain process.

An unyielding focus on demand for product is perhaps the guiding attribute of a lean supply

chain management strategy. If a product for which there is no demand enters the supply chain,

it is immediately a source of wasted material, wasted process and wasted manpower.

Implementation requires that all suppliers and processors everywhere in the supply chain

process receive demand signals that come from the customer, not from within the company,

and turn those signals into components of the final saleable product for which they are

responsible. While the impact on profits of waste from unsuitable product is obvious and its

magnitude may outstrip all other sources of waste, there is also a fringe benefit in that a

demand signal trigger for supply chain activity eliminates the need for forecasting

(Balakrishan, 2004).

The supply chain permeates every facet of the enterprise, and if a lean approach to managing it

is to succeed, the entire organization has to focus on removing waste and adding value. Part of

Page 53: Lean supply chain practices and supply chain

43

that change requires everyone involved to look beyond the boundaries of the company to

relationships with customers and suppliers at all levels. The change in focus is essential, but

implementing it can be difficult in today‟s international supply chain environment.

Nevertheless, the principles of lean business are straightforward and can form the foundation

for an organization‟s new approach to its supply chain. Product value has to be defined from

the customer‟s point of view, not the company‟s. This seemingly simple principle is the key to

eliminating waste caused by such things as making the wrong product (one that nobody wants),

making the product at an unsuitable quality level, making too much or too little of it, or

delivering it too slowly or through the wrong channel (Hines et al, 2004).

Process Standardization: The goal of standardizing processes is to provide the continuous flow

that lean supply chain management requires. There are two reasons for this. First, a process that

is standardized across many of a company‟s products may be used to produce whatever product

is currently in demand. Second, when an industry-standard process is used, the company can

readily shift production from one supply partner to another. The same benefits accrue for use of

standardized information and financial processes that support the supply chain (Chen &

Paulraj, 2004). Creating a lean supply chain is a challenge not to be undertaken lightly. It

requires changes in people‟s behavior, business processes and technology. But companies

willing to commit effort and resources to it can position themselves to jump ahead and stay

ahead of the competition. Supply chain management is ultimately about influencing behavior

in particular directions and in particular ways. The underlying logics, drivers, enablers and

barriers merit and require close attention. There is already a reasonably well-developed field

Page 54: Lean supply chain practices and supply chain

44

concerned with buyer-supplier behavior (or purchasing) and this has its own set of core

concerns (Randall et al 2003).

Inspection activities include the checks of the quality or quantity of product or information

delay (or storage). It mainly entails checking three types of defects in the supply process:

Product defects, service defects and scrap defects. Product defects comprise defects in physical

goods that are not caught by in-line or end-of-line inspection and are therefore passed on to

customers. In a few cases, faulty products may be found that were detected but still passed to

customers; this would also fall in this category. Scrap defects comprise defects that have been

caught by in-line or end-of-line inspection. The in-line inspection methods will vary and can

consist of traditional product inspection, statistical process control or through poke yoke

devices. Service defects include problems given to a customer that are not directly related to

the goods themselves, but due to the accompanying level of service.

The most important of these service defects is inappropriate delivery (late or early). Others

include incorrect paperwork or documentation, incorrect packaging or labelling, incorrect

quantity and incorrect invoicing. The approach integrates quality and logistics performance

measures. It is designed to establish both internal and external quality levels as well as levels of

customer service (Reichhart & Holweng, 2007).

Assurance activities include the responsibility to coordinate with suppliers on matters of

scheduling, supply continuity, hedging, and research into new sources or programs. It entails

the systematic measurement, comparison with a standard, monitoring of processes and an

Page 55: Lean supply chain practices and supply chain

45

associated feedback loop that confers error prevention. For example, a low priced product may

be viewed as having high quality because it is disposable, where another may be viewed as

having poor quality because it is not disposable (Saunders et al , 2007). The subsequent Factor

Rotation as shown in table 10 was conducted on the basis of these 6 subgroups.

Table 4.11: Varimax Factor Rotation

Factor

1

Factor

2

Factor

3

Factor

4

Items

Factor 1: Cross-functionality

Demand management

0.79 0.17 0.22 0.17

Waste management 0.84 0.08 0.18 0.23

Standardization practices 0.80 0.16 0.018 0.25

Behavioral practices 0.85 0.13 0.17 0.23

Inspection activities 0.75 0.12 0.16 0.21

Assurance activities 0.76 0.14 0.15 0.22

Source: research data

4.7 Effect of Supply Chain Practices on its Responsiveness

With the objective of the study of seeking to establish the relationship between supply chain

responsiveness and lean supply chain practices in mind, the analyzed output using inferential

statistics is as follows: Pearson Correlation analysis was used to achieve this end result with

associated regression for significant tests set at 95% confidence level. The table below shows

that there were significant correlation coefficients established between supply chain

Page 56: Lean supply chain practices and supply chain

46

responsiveness and lean supply chain practices. Those relationships falling within the line of

best fit in the output were established among the independent and dependent variables: demand

management practices (R = 0.686, p =.002); waste management practices (R = 0.690, p =

.023); standardization practices (R = 0.719, p = .005); inspection activities (R = 0.692, p =

.004); behavioral practices (R = 0.428, p = .001) and assurance activities (R = 0.533, p = .001).

Essential relationship in terms of significance set was established between supply chain

responsiveness and lean supply chain practices (R = 0.428, p = .001). This depicts that lean

supply chain practices positively influence supply chain responsiveness.

Table 4.12: Correlation

Lean supply chain

practices

Supply chain responsiveness

Demand management Pearson Correlation 0.686**

Sig. (2-tailed) .002

Waste management Pearson Correlation 0.690*

Sig. (2-tailed) .023

Standardization practices Pearson Correlation 0.719**

Sig. (2-tailed) .005

Behavioral practices

Pearson Correlation 0.428**

Sig. (2-tailed) .001

Inspection activities

Pearson Correlation 0.692**

Sig. (2-tailed) .004

Assurance activities Pearson Correlation 0.533**

Sig. (2-tailed) .001

Source: research data

Page 57: Lean supply chain practices and supply chain

47

Correlation is significant at the 0.05 level (2-tailed).*

Correlation is significant at the 0.01 level (2-tailed). **

The study sought to establish how various lean supply chain practices are employed by

vegetable oil processing firms in Kenya using multiple linear regression analysis. The practices

were: demand management practices, waste management practices, standardization practices,

and behavioural practices.

The table below shows that there is a good linear association between the dependent and

independent variables used in the study. This is shown by a correlation (R) coefficient which

came out as 0.887. The determination coefficient as measured by the adjusted R-square

presents a moderately strong relationship between dependent and independent variables given a

value of 0.764. This depicts that the model accounts for 76.4% of the variations in supply chain

responsiveness while 33.6% remains unexplained by the regression model. Durbin Watson test

was used as one of the preliminary test for regression which to test whether there is any

autocorrelation within the model‟s residuals. Given that the Durbin Watson value was close to

2 (2.104), there was no autocorrelation in the model‟s residuals.

Table 4.13: Regression Model's Goodness of Fit Statistics

R R Square Adjusted R

Square

Std. Error of the

Estimate

Durbin-Watson

.887a

.787 .764 .757 2.104

a. Predictors: (Constant), demand management practices, waste management practices,

standardization practices, behavioural practices, inspection activities, assurance activities

b. Dependent Variable: Supply Chain responsiveness

Page 58: Lean supply chain practices and supply chain

48

The ANOVA statistics presented in the table below was used to present the regression model

significance. An F-significance score of p=0.001 was established showing that there is a

probability of less than 0.1% of the regression model presenting false information. Thus, the

model is very significant.

Table 4.14: Analysis of Variance (ANOVA) in the Regression model

Sum of

Squares

df Mean

Square

F Sig.

Regression 120.450 5 20.075 35.037 .000b

Residual 32.659 32 .573

Total 153.109 37

Source: research data

a. Predictors: (Constant), demand management practices, waste management practices,

standardization practices, behavioural practices, inspection activities, assurance activities

b. Dependent Variable: Supply Chain responsiveness

Table 4.15: Test of Statistical Significance of Lean Supply Chain Practices

Lean supply chain

practices

Unstandardized

Coefficients

Standardized

Coefficients

t Sig.

B Std. Error Beta

(Constant) 2.653 .861 10.055 . 983

Demand management .316 .097 .270 3.268 .002

Waste management .003 .137 .002 .022 .023

Standardization 1.403 .141 .998 9.925 .000

Page 59: Lean supply chain practices and supply chain

49

Behavioural .462 .204 .328 2.260 .028

Inspection activities .552 .073 .307 2.506 .003

Assurance activities .563 .281 .494 4.953 .016

a. Dependent Variable: Supply chain responsiveness

Source: research data

As shown in regression analysis results and Table 4.15, lean supply chain has a positive effect

on supply chain responsiveness and explains 78.7% of the changes in the latter. Lean supply

chain practices ensure that there is demand management by producing only what is needed,

when it is needed, and where it is needed; supply is tightly linked with demand. Lean supply

chain management also ensures that inventory risk is reduced, processes focus on activities that

add value for the customer and employees work to create mistake-proof processes (Lysons and

Farrington, 2006). Consequently, supply chain responsiveness enhances a firm‟s adaptiveness

to demand fluctuation and overcome the environment uncertainty at a lower cost due to the

shorter lead time. A well-designed supply chain operate, delivers products quickly to the end

customer, with minimum waste.

As established by the findings, responsiveness enables firms to compete based on cost, quality,

time to market, and delivery dependability; responsiveness of a firm‟s logistics (transportation

and distribution) process enable organizations to introduce new products faster than major

competitors and also lead to greater ability of a firm to provide on time the type and volume of

product required by customers (increasing delivery dependability); responsiveness of a firm‟s

supplier network improves - the ability of the firm to rapidly introduce new products and

features in the market place (compete based on product innovation and time to market), as well

Page 60: Lean supply chain practices and supply chain

50

as improve a firm‟s ability to provide on time delivery (increase its delivery dependability) as

the firms are endowed with responsive suppliers.

Page 61: Lean supply chain practices and supply chain

51

CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND

RECOMMENDATIONS

5.1 Introduction

This chapter consists of the summary of findings, conclusion and recommendation of the study

and there after the suggestions for further studies respectively.

5.2 Summary of Findings

Supply chain has received much attention from researchers and practitioners. In the

competitive environment, most leading edge companies realized that by transferring costs

either upstream or downstream they are actually not increasing their competitiveness, since all

cost ultimately make up their way to consumers. Supply chain management guides firms to co-

operate with a common goal to increase the overall channel sales and profitability, rather than

completing for a bigger share of a fixed profit. There was a variety of vegetable oil processing

firms in Kenya whom a majority of the firms had been in operation for above 10 years and

above. The ownership structure of the majority of the vegetable oil processing firms was local

ownership.

The study also found out that the majority of the computers were networked

interdepartmentally with other departments linked to the main source of information. The study

found out that the size of the firms differed ranging from 1,000 to 2,000 employees in their

company. The factory size of the company ranged from 7 acres to 15 acres of land for the

company. The study found out the annual production of the vegetable oil processing firms

Page 62: Lean supply chain practices and supply chain

52

ranged from 500 tons to 65,000 tons per year. The study found out that the lean supply chain

practices included demand management chain practices, waste management practices,

standardized practices, quality assurance practices, inspection activities and behavioral

practices.

The study also found out that the majority of the firms practice vendor managed inventory

management techniques for the customers. The study found out that the firms face stock outs

semiannually and the results accounted for 61%. There were some challenges that face the

vegetable oil processing firms were: ability to develop and maintain the cost leadership process

to reduced cost without sacrificing quality; price competitiveness; accessibility of financial

resources to high efficient production equipment; designing creative intensive strategies;

government imposing external costs; technological innovation; human resource policies;

organizations adopt technological innovation and intensive strategies to keep pace with the

changing environment.

The study also found out ways to mitigate the challenges they face in the ability to develop and

maintain cost leadership processes they face challenges such as stiff competitive prices hence

they produce more stocks that do not run out; accessibility of financial resources to invest in

high efficient production equipment in an effort to adapt to the strategic responses while

responding to environmental changes; creating intensive strategies to keep pace with changing

environment; developing policies that protect the firms from government interference

especially on the pricing of their products; through training and seminars the adoption of

technological innovation and intensive strategies to improve value for the customers.

Page 63: Lean supply chain practices and supply chain

53

The study results depicted that lean supply chain practices positively influence supply chain

responsiveness; that there is a good linear association between supply chain responsiveness and

lean supply chain practices and also that study depicted that the model accounts for 76.4% of

the variations in supply chain responsiveness while 33.6% remains unexplained by the

regression model. The study results depicted that among the lean supply chain practices,

standardization practices followed by assurance activities, inspection activities, behavioural

practices, demand management practices and waste management practices would have the

most positive influence on growth.

5.3 Conclusion

The study concluded that the lean supply chain practices used in vegetable oil processing firms

in Kenya were demand management practices, waste management practices, standardization

practices, behavioral practices, inspection activities and assurance activities. The study

concluded that the firms that have responsive supply chain experience the advantage of

improved lead time for innovative products life cycle, reduced costs/ increased revenue by

optimizing inventory levels under demand uncertainty , create a win-win situation with

suppliers by implementing quantity- flexible contacts that share risk among supply chain

partners, save time and expense by understanding which supply chain strategies do not need

expensive software for implementation and reduced costs by learning ways of dealing

successfully with supply uncertainty.

Page 64: Lean supply chain practices and supply chain

54

The study also concluded that lean supply chain practices and supply chain responsiveness

requires an information flow and policies from the market place to supply chain members in

order to hedge inventory and available production capacity against uncertain demand.

5.4 Recommendations

The study recommends that demand management practices on the firms should invest in time

and money in collaborative demand planning. The study recommends that demand

management practices on the firms should communicate its demand forecasts to its supply

chain partners. The study recommends that waste management practices on the firm should

practice the philosophy of grouping similar parts in families to eliminate movement and queue. The

study recommended that the firm should have standardized and rationalized the range of materials, parts

and consumables. The study recommended that the behavioral practices on the firm have always

broadened the experience of work to enhance employee needs satisfaction.The study recommended

that all firm‟s business activities should be technologically driven in order to have a

competitive edge which is seen as path to better results given the quality of processes and

procedures that are enhanced by environmental force.

5.5 Recommendation for further studies

The researcher recommends that a similar study should be embarked on different processing

firms in Kenya to verify the study results. Finally the researcher recommends that future

researchers should investigate on the influence of government policies on lean supply chain

practices and supply chain responsiveness.

Page 65: Lean supply chain practices and supply chain

55

REFERENCES

Anond,G., and Kodali, R.,(2008), “A Conceptual Framework for lean supply chain and its

Implementation”, International Journal of Value chain Management, 2(3), 313

Aquilano, N.J., et al. (1995), Fundamentals if Operations management, Irwin, Chicago, IL.

Balakrishan, A. (2004), “Collaboration and coordination in supply chain management and e-

commerce”, Production and Operations Management, Vol. 13 No. 1, pp. 1-2

Bodognz, G. (2002) “Lean Supplier Networls, Massachusetts Institute of Technology, ppt.

slides.BS EN ISO 8402, 1995.

Boysons, S. et al. (1999), Logistics and the Extended Enterprise: Benchmarks and Best

Practices for the manufacturing professional, Wiley, New York, NY.

Chen, I.J. and Paulraj, A. (2004), “Towards a theory of supply chain management: the

constructs and measurements”, Journal of Operations Management, Vol. 22 No. 2, pp.

119-51

Cigolini, R. et al. (2004), “A new framework for supply chain management conceptual model

and empirical test”, International Journal of Operations and Production Management,

24 (2) pp. 7-41

Daudi, A and Zailani, S. (2011), “Lean supply Chain Practices and Performance in the Context

of Malaysia, Available at: www. Intechopen.com

Davis, T. (1993), “Effective Supply Chain Management”, Sloam Management Review, 34 (4),

pp. 35-46

Duclos, L.K et al. (2003), “A Conceptual Model of Supply Chain Flexibility”, Industrial

Management and Data Systems, 103 (6), pp. 446-456.

Page 66: Lean supply chain practices and supply chain

56

Export Processing Zones Authority (2005). Vegetable oil industries in Kenya,Retrieved August

2013 from http://www.epzakenya.co.ke.

Fisher, M.L et al. (1994),”Making supply meet demand in an uncertain world”, Harvard

Business Review, 72 (3), pp. 82-93

Frohlich, M.T., and Westbrook, R. (2001), “Arcs of integration: an international study of

supply chain strategy‟, Journal of Operations Management, 18, pp. 185-200

Gould, P. (1997),”What is Agility”, Journal of Manufacturing Engineer, 76(1), pp. 28-31.

Gunasekaran, A et al. (2001),”Performance Measures and Metrics in a supply chain

environment‟, International Journal of Operations and production Management, 20(5),

pp. 71-87

Harland, C. (1996),”Supply network strategies- the case of health supplies”, European journal

of Purchasing and supply Management, 2(4) pp. 183-92.

Hines, P., Holweg, M. and Rich, N. (2004), “Learning to evolve: a review of contemporary

lean thinking”, International Journal of Operations & Production Management , Vol. 24

No. 10, pp. 994-1012

Holweng, M. (2005), “The three dimensions for responsiveness”, International Journal of

Operations and Production Management, 25 (7), pp. 603-22.

Hucztski, A. and Buchanan, D. (2002). Organizational Behavior, An Introductory Text, Pearson

Education Ltd, 4th

Edition.

Kenya Association of Manufacturers (2011). Kenya manufacturers and exporters directory.

Nairobi, Kenya : Adric Communication.

Kenya National Bureau of Statistics (2011). Economic Survey. Nairobi,Kenya : Government

Printers.

Page 67: Lean supply chain practices and supply chain

57

Kenya National Bureau of Statistics (2010). Statistical Abstruct. Nairobi,Kenya :Government

Printers.

Lee, H.L. (2004), “Aligning Supply Chain Strategies with Production Uncertainties”,

California Management Review, 44(3), pp. 105.

Lee, H.L. et al. (1997), “The Value of Information Sharing In a Two- Level Supply Chain”,

Management Science, 46 (5), 626.

Li, S. et al. (2006), “The Impact of Supply Chain Management Practices on Competitive

Advantage and Organizational Performance”, Omega, 34 (2). Pp. 107-124.

Liker, J.K., (2004),”The Toyota Way 14 Management Principles form the world Greatest

Manufacturers”, MC Graw Hill, ISBN 0-07139231-9

Lin, Z. et al. (2006), “Should Lean replace mass Organization systems?”, Journal of

International Business Studies, 30, pp. 2-16.

Lummus, R.R., et al. (2003), “Supply Chain Flexibility: building a new model”, Global journal

of Flexible Systems Management, 4 (4), pp.1-13.

Lysons, K. and Farrington, B. (2006), Purchasing and supply chain management, pearsons

Education Ltd, 7th

Edition.

Mac Duffie, J.P and Helper, K.S. (1997), “Product Variety and Manufacturing Performance:

evidence from the International assembly plant study”, Management Science, 42 (3),

pp. 350-69.

Mageto, J.N., (2009), “Relationship Between Supply Chain Performance and Supply Chain

Responsiveness: A case of Supermarkets in Nairobi, Kenya”, Unpublished MBA thesis,

University of Nairobi, Nairobi, Kenya.

Page 68: Lean supply chain practices and supply chain

58

Mason-Jones,R.N., and Towill, D.R. (2000), “Engineering the Leagile Supply Chain”,

International Journal of Agile Management Systems, 14, pp. 37-55.

McCutcheon, D.M. et al (1994) “The Customization-responsiveness sqeeze”, Sloam

Management Review, 35 (2), pp. 89-99.

Mentzer, J.T. et al (2001), “Defining Supply Chain Management”, Journal of Business

Logistics, 22(2), pp. 1-25

Moden, Y. (1998), Toyota Production System: An Integrated Approach to Just-In-Time.

Norek, C.D., (2002), “Returns Management Making Order out or Chaos”, Supply Chain

Management Review, May/June 2002.

Omondi, B.(2012),”Strategic Response to Environmental changes by vegetable oil processing

and refinimg firms in Kenya”, Unpublished MBA thesis,University of Nairobi,Nairobi,

Kenya.

Omondi, J. (2008), “The application of lean thinking to business process management at Kenya

Revenue Authority”, Unpublished MBA thesis, University of Nairobi, Nairobi, Kenya.

Poirier, C.C. (1999), Advanced Supply Chain Management, Berret-Koehler, San Francisco, CA

Power, D.J. and Sohal, A. (2001) “Critical Success Factors in Agile Supply Chain

Management, An Empirical Study”, International Journal of Physical Distribution and

Logistics, 31 (4), pp.247-265.

Prater, S. et al (2001), “Supply Chain Improvement Initiatives in the Textile, Clothing,

Footwear and Leather Industry; A Field Study”, International Journal of Logistics

Systems and Management, 3 (1), pp. 1-19.

Page 69: Lean supply chain practices and supply chain

59

Randall, T., Morgan, R. and Morton, A. (2003), “Efficient versus responsive supply chain

choice: an empirical examination of influential factors”, Journal of Product Innovation

Management, Vol. 20 No. 6, pp. 430-44

Reichhart, A. and Holweng, M. (2007), “Creating the Customer responsive Supply Chain; a

reconciliation of concepts”, Journal of Operations and Production Management,

27(11), pp.1144-1172.

Saunders, M. et al (2007), Research Methods for Business Students, London, UK : Prentice

Hall, 4th

Edition.

Shingo, S. (1989), A Study of the Toyota Production System From an Industrial Engineering

Viewpoint, Productivity Press, New York, NY.

Stalk, G. and Hout, T. (1990),”Competing against Time”, Free Press, New York, NY.

Tan, K.C. et al. (1998), “Supply Chain Management; Supplier Performance and Firms

Performance”, International Journal of Purchasing and Materials Management, 34(3),

pp.2-9.

Thomas, P.R. (1990), “Competitiveness through Total Cycle Time”,MC Graw- Hill,

Maidenhead.

Togar. M.s and Ramaswami, S. (2004), “A benchmarking scheme for supply chain

collaboration”, An International Journal, 11(1), pp. 9-30.

Towill, R.D. and Christopher, M. (2002), “The Supply Chain Strategy Conundrum: to be lean

or agile or to be lean and agile?”, International Journal of Logistics: Research and

Application, 5 (3), pp. 299-309.

Towill, R.D. (1996), “The Seamless supply chain- The Predators Strategic Advantage”,

International Journal of Technology Management, 14,pp. 37-55.

Page 70: Lean supply chain practices and supply chain

60

Veckery, S.K. et al (2003), “The Effect of an Integrative Supply Chain Strategy on Customer

Service and Financial Performance: An Analysis of Direct Versus Indirect

Relationship”, Journal of Operations Management, 21,523-539.

Womack, J. P. and Jones, D.T. (1996), Lean Thinking, Simon and Schuster, New York, NY.

Womack, J.P. and Jones, D.T. (1994), “From Lean Production to the lean enterprise”, Harvard

Business Review, March-April, pp.93-103.

Wu, S. and Wee, H.M. (2009), “lean supply chain and its effect on production cost and quality;

a case study on Ford Motor Company”, supply chain management: An International

Journal, 14 (5), pp. 335-341.

Zikmud, W. (2003), Business Research Method, South- West: Thomas Publishers.

Page 71: Lean supply chain practices and supply chain

61

APPENDIX 1: RESEACH QUESTIONAIRE

This is a research aims at determining how your firm and other firms lean supply chain

practices relate to supply chain responsiveness in trying to meet the need of end customers

along the supply chain. There is no right or wrong answers and the results are confidential and

strictly for academic purpose. Your honest participation in this survey was highly appreciated.

PART A: ORGANIZATIONAL PROFILE

1. Name of company_______________________________________________________

2. How many years has your company been in operation?

a) Below 5 years

b) 5 to 10 years

c) 11 to 15 years

d) 16 to 20 years

e) Above 20 years

3. Title of interviewee__________________________________________________

4. Ownership structure

a) Foreign

b) Private

c) Both local and foreign

d) Government owned

e) Both private and government owned

5) Size of company (No. of employees) ______________________________________

6) Factory size (land occupied in Acres) ______________________________________

7. How are your computers networked?

a) Departmentally

b) Interdepartmentally

c) Externally, with supply chain partners

8. Annual production through put _________________________________________

Page 72: Lean supply chain practices and supply chain

62

PART B: LEAN SUPPLY CHAIN PRACTICES

1. To what extent has your firm implemented the following demand management

practices (please tick appropriately using a scale of 1-5, where 1= very great and 5 =

very small)

Demand management

practices

Very

great

Great Moderately Small Very

small

The firm has invested time

and money in collaborative

demand planning

The firms always conducts

annual demand forecasting

The firm always conducts

annual production and

purchasing planning

The firm always

communicates its demand

forecasts to its supply chain

partners.

The firm always does

product positioning, pricing

2 3 1 4 5

1 1 2

1

1

2

2

3

3

4

4

5

5

5

3 4

1 2 3 4 5

Page 73: Lean supply chain practices and supply chain

63

and promotion of its

products.

The firm manages its

customer orders to match

available supply.

2. To what extent has your firm implemented the following waste management practices

(use a scale of 1 -5, where1 = very great and 5 = very small)

Waste management practices Very great Great moderately Small Very small

The firm has small

specialized plants rather than

vertically integrated

manufacturing facilities.

The firm practices the

philosophy of grouping

similar parts in families to

eliminate movement and

queue

The firm encourages doing

the right thing the first time

The firm produces what is

needed and no more (JIT)

The firms production flow is

smooth to dampen reaction

waves that occur in response

to schedule variations

The authority to produce or

supply additional parts

always comes from the

downstream operations.

1

1

1

1

1

1

2 2

2

2

2

2

2

3

3

3

3

3

3

3

4

4

4

4

4

4 5

5

5

5

5

5

2

1 2 3 4 5

2

Page 74: Lean supply chain practices and supply chain

64

3. To what extent has your firm implemented the following standardization practices (

use a scale of 1 – 5, where 1 = very great and 5 = very small)

Standardization practices Very great Great Moderately Small Very small

The firm has standardized

and rationalized the range of

materials, parts and

consumables

The firm always employs

quality assurance at all times

The firm encourages quality

control activities in all its

production stages

4. Which of the following quality assurance activities does your firm practice as an

approach to defects prevention

a) Quality system (ISO 9000)

b) New design control

c) Design for manufacturing processes

d) Incoming material control

e) Supplier appraisal

f) All of the above

g) None of the above

5. Which of the following inspection activities does your firm undertake to detect

defects

1

1

1

2

2

2

3

3

3

4

4

4 5

5

5

Page 75: Lean supply chain practices and supply chain

65

a) Receiving inspection

b) Classification inspection

c) Control inspection

d) Audit inspection

e) All of the above

f) None of the above

6. To what extent has your firm implemented the following behavioral practices

(use a scale of 1 -5, where 1 = very great extend and 5 = very small extend)

Behavioral practices Very great Great Moderately Small Very

small

The firm has always

broadened the experience of

work to enhance employee

needs satisfaction

The firm has multiple carrier

ladders for its staff

The firm always encourages

high employee participation

The firm has many and

flexible employee incentives

The firm always encourages

quality of working life

emphasis

1

1

1

2

2

3

3 2

3

4

4

4

5

5

5

1 2

1 2

3

3

4 5

5 4

Page 76: Lean supply chain practices and supply chain

66

PART C: SUPPLY CHAIN RESPONSIVENESS INDICATOR: DATA FOR

THE LAST FIVE YEARS

Responsiveness indicator Unit of

measure

2008 2009 2010 2011 2012

Cost of after sale service Kenya

Shillings

Order fulfillment time Time

Time of delivery Hours

Value of raw materials Kenya

Shillings

Work-In-Progress (W.I.P) Numbers

Finished goods Numbers

Number of planned deliveries Percentage

Number of not-on- time deliveries Percentage

Number of incorrect quantity

deliveries

Percentage

Number of good units made Number

Quantity of defective units Parts per

million

Total quantity of units supplied Parts per

million

Employee output value Kenya

shillings

Employee input value Kenya

shillings

Number of employees Number

2. Does your firm practice “Vendor managed inventory” management technique for your

customers?

Page 77: Lean supply chain practices and supply chain

67

Yes No

3. How often does your firm face stock outs? Tick appropriately

a) Quite often

b) Weekly

c) Monthly

d) Semiannually

e) Not at all

f) Others specify

____________________________________________________________________________

____________________________________________________________________________

______________

4) What are some of the challenges facing vegetable oil processing firms in meeting

customer requirement

____________________________________________________________________________

____________________________________________________________________________

______________

5) How are these challenges mitigated?

____________________________________________________________________________

____________________________________________________________________________

____________________________________________________________________________

_____________________

Thank you very much for your time and cooperation.

Page 78: Lean supply chain practices and supply chain

68

Appendix II: Correlation Matrix of major lean supply chain practices and the main

supply chain responsiveness

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 Q19

Correlation Q1 1.00 -.90 .10 .42 .43 .305 .19 .15 -.12 .37 .305 -.41 .32 .21 .50 .36 -.61 -.16 .37

Q2 -.09 1.00 -.34 -.12 .25 .33 .23 .12 -32 -.12 -.09 .03 -.34 -.12 -.20 -.19 .34 -32 -.12

Q3 -.34 .32 1.00 -.38 -.56 -.09 .45 .62 -.36 .20 -.34 .32 0.26 -.38 -.16 .34 .25 -.36 .20

Q4 .44 .43 .305 1.00 .09 .43 .21 .37 -.61 .34 .44 .43 .305 .04 .305 .35 .50 -.61 .34

Q5 .40 .25 .33 .40 1.00 .44 .35 -.16 -17 -.19 .40 .25 .33 .40 -.19 .26 .37 -17 -.19

Q6 .22 -.56 -.09 .28 .18 1.00 .21 .305 -.24 -.17 .22 -.56 -.09 .28 -.35 .40 .37 -.24 -.17

Q7 .305 -.32 .21 .50 .34 .22 1.00 .33 .23 -.16 .31 -.32 .21 .50 -.13 .31 -.19 .23 -.16

Q8 .33 -.12 .36 .37 .37 .07 .05 1.00 .29 .47 .29 .25 .33 .23 -.20 -.19 .21 -.10 .04

Q9 -.09 -32 .34 .37 -.09 1.00 -.34 -.12 1.00 .17 .38 -.56 -.09 .45 .37 -.16 -.13 .31 -.05

Q10 .21 -.36 -.20 -.19 -.34 .32 1.00 -.38 -.10 1.00 .41 .09 .43 .21 .37 .305 -.41 .32 -.06

Q11 .36 -.61 -.16 .34 .44 .43 .305 1.00 -.08 1.00 .22 .15 .49 -.19 .33 -.32 .09 -.06

Q12 .34 -17 .305 .35 .40 .25 .33 .40 -.34 .32 .17 1.00 .16 .23 .21 -.26 -.42 .03 -.09

Q13 .25 -.24 -.19 .26 .22 -.56 -.09 .28 .44 .43 .31 .27 1.00 -.03 -.03 .43 .47 -.10 -.04

Q14 .50 -.20 -.35 .40 .305 -.32 .21 .50 .40 .25 .33 .19 .23 1.00 -.06 -.19 -.61 -.16

Q15 .37 -.16 -.13 .31 -.09 .28 .18 .305 -.41 -.56 -.09 .28 .34 .15 1.00 .03 .34 -17 .305

Q16 .37 .305 -.41 .32 .21 .50 .34 .33 -.32 -.32 .21 .50 .305 .33 .51 1.00 .35 -.24 -.19

Q17 -.19 .33 -.32 .09 .36 .37 .37 -.26 -.42 -.12 .36 .37 .33 .40 .19 .02 1.00 -.05 -.07

Q18 .21 -.26 -.42 .03 .34 .37 -.09 -.37 .27 .43 .16 .19 -.09 .28 .01 .06 .51 1.00 .23

Q19 -.10 -.15 .15 .42 .14 .16 .28 -.33 -.20 -.35 .40 .305 -.32 .21 .09 .05 -.21 -.39 1.00

Sig (1-tailed) Q1 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Q2 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Q3 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Q4 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Q5 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Q6 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Q7 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Q8 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Page 79: Lean supply chain practices and supply chain

69

Q9 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Q10 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Q11 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Q12 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Q13 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Q14 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Q15 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Q16 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Q17 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Q18 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Q19 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Determinant = 5.271E-04

Source: Survey Data (2013)

Page 80: Lean supply chain practices and supply chain

70

APPENDIX III: LIST OF VEGETABLE OIL PROCESSING AND REFINING

FIRMS IN KENYA

1 ARKAY INDUSTRIES

2 VOI INDUSTRIES

3 BIDCO OIL REFINARIES

4 DARFORDS ENTERPRISES LTD

5 DIAMOND INDUSTRIES

6 EARTH OIL KENYA

7 EASTERN INDUSTRIES LTD

8 KAPA OIL REFINERIES

9 MALINDI INDUSTRIES

10 PREMIER OIL MILLS

11 TINGA TINGA LIFESTYLE

12 TOWRIT OIL LTD

13 UMOJA MAINTENANCE CENTRE

14 UNILIVER (K) LTD

15 EDIBLE OIL PRODUCTS

16 KISUMU WALLA OIL INDUSTRIES

Page 81: Lean supply chain practices and supply chain

71

17 RIFT VALLEY PRODUCT

18 MENEGAI OIL REFINERIES LTD

19 GILOIL COMPANY LTD

20 PWANI OIL PRODUCTS

21 CORN PRODUCTS KENYA LTD

22 KENYA NUT COMPANY

23 PREMIER FOOD INDUSTRIES LTD

24 ABERDARE OIL MILLERS

25 AFYA COOKING OIL MANUFACTURES

26 NAKURU MILLS

27 OIL CROP DEVELOPMENT LTD

28 PALMAC OIL REFINERIES

29 OIL EXTRACTION LTD

30 SANSORA OIL MILLS

31 WESTERN SEED AND GRAIN COMPANY

SOURCE: KAM (2011) Directory; KNBS (2011)